Current liabilities Accounts payable and accrued liabilities (notes 5 and 13) $ 481,401 $ 466,584 Total liabilities 481, ,584

Transcription

1 RHC CAPITAL CORPORATION (FORMERLY ROCKEFELLER HUGHES CORPORATION) CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED APRIL 30, 2017 (EXPRESSED IN UNITED STATES DOLLARS) (UNAUDITED) Notice to Reader The accompanying unaudited interim consolidated financial statements of RHC Capital Corporation (the "Company") have been prepared by and are the responsibility of management. The unaudited interim consolidated financial statements have not been reviewed by the Company's auditors.

2 Condensed Interim Consolidated Statements of Financial Position As at As at April 30, July 31, ASSETS Current assets Cash and cash equivalents (note 3) $ 1,516,847 $ 1,810,247 Accounts receivable 13,551 21,836 Prepaid expenses and deposits 2,621 42,087 Total assets $ 1,533,019 $ 1,874,170 SHAREHOLDERS' EQUITY AND LIABILITIES Current liabilities Accounts payable and accrued liabilities (notes 5 and 13) $ 481,401 $ 466,584 Total liabilities 481, ,584 Shareholders' equity Share capital (note 6) 20,802,372 20,802,372 Contributed surplus 1,524,202 1,509,421 Accumulated other comprehensive loss (391,028) (334,588) Deficit (20,883,928) (20,569,619) Total shareholders' equity 1,051,618 1,407,586 Total shareholders' equity and liabilities $ 1,533,019 $ 1,874,170 Continuing operations (note 1) Commitments (note 12) Subsequent event (note 14) Approved on behalf of the Board of Directors: "Zoran Arandjelovic", Director "Michael Graham", Director The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements

3 Condensed Interim Consolidated Statements of Loss and Comprehensive Loss Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended April 30, April 30, April 30, April 30, Revenues: Oil and gas revenue $ - $ 56,759 $ - $ 659,857 Royalties - (16,699) - (194,137) Net oil and gas revenue - 40, ,720 Operating costs and expenses Production expenses - 29, ,268 General and administrative expenses (note 10) 142, , ,732 1,604,515 Total operating costs and expenses 142, , ,732 1,766,783 Other income (loss) Loss on disposal of assets (note 4) - (4,293,031) - (4,293,031) Gain on settlement of accounts payable and other liabilities (note 5) - 628, ,819 Interest income - 5,196-11,595 Gain on dissolution of subsidiary (note 11) ,423 - Total other income (loss) - (3,659,016) 169,423 (3,652,617) Net loss (142,178) (4,330,250) (314,309) (4,953,680) Other comprehensive loss: Items that will not be reclassified subsequently to loss Currency translation adjustments (52,664) 127,348 (56,440) 102,617 Net comprehensive loss for the period $ (194,842) $ (4,202,902) $ (370,749) $ (4,851,063) Basic and diluted net loss per share (note 9) $ (0.00) $ (0.06) $ (0.00) $ (0.07) Weighted average number of common shares outstanding - basic and diluted 75,216,186 75,216,186 75,216,186 75,019,559 The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements

4 Condensed Interim Consolidated Statements of Cash Flows Nine Months Ended April 30, Operating activities Net loss for the period $ (314,309) $ (4,953,680) Adjustments for: Stock-based compensation 14, ,423 Shares issued for services - 174,127 Gain on settlement of accounts payable and other liabilities - (628,819) Loss on disposal of assets - 4,293,031 Gain on dissolution of subsidiary (169,423) - Changes in non-cash working capital items 231, ,771 Net cash used in operating activities (236,960) (473,147) Investing activities Additions to property and equipment - (2,680,103) Proceeds on disposal of assets - 1,265,010 Changes in non-cash working capital balance related to assets - (53,770) Net cash provided by (used in) investing activities - (1,468,863) Effect of currency rates on cash and cash equivalents (56,440) 102,617 Net change in cash and cash equivalents (293,400) (1,839,393) Cash and cash equivalents, beginning of period 1,810,247 4,780,805 Cash and cash equivalents, end of period $ 1,516,847 $ 2,941,412 The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements

5 Condensed Interim Consolidated Statements of Changes in Shareholders' Equity Equity attributable to shareholders Accumulated other Total Share Shares to be Contributed comprehensive shareholders' capital issued surplus Deficit income (loss) equity Balance, July 31, 2015 $ 20,568,245 $ 60,000 $ 1,452,190 $ (15,695,006) $ (471,633) $ 5,913,796 Shares issued 234,127 (60,000) ,127 Stock-based compensation , ,423 Foreign currency translation adjustment , ,617 Net loss for the period (4,953,680) - (4,953,680) Balance, April 30, 2016 $ 20,802,372 $ - $ 1,680,613 $ (20,648,686) $ (369,016) $ 1,465,283 Balance, July 31, 2016 $ 20,802,372 $ - $ 1,509,421 $ (20,569,619) $ (334,588) $ 1,407,586 Stock-based compensation , ,781 Foreign currency translation adjustment (56,440) (56,440) Net loss for the period (314,309) - (314,309) Balance, April 30, 2017 $ 20,802,372 $ - $ 1,524,202 $ (20,883,928) $ (391,028) $ 1,051,618 The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements

6 1. Description of business and continuing operations RHC Capital Corporation (the Company or RHC ) was incorporated under the laws of the Province of Ontario on August 15, The Company was previously engaged in the acquisition, exploration, development and production of oil and natural gas reserves in North America. On February 27, 2017, the Company began trading on the NEX board of the TSX Venture Exchange ("TSX-V") under the trading symbol RHC.H. Previously the Company traded on the TSX- V under the trading symbol RHC. The address of its registered office is 67 Rebecca Court, Maple, Ontario, L6A 1G2. On February 23, 2017, the Company changed its name from Rockefeller Hughes Corporation to RHC Capital Corporation. These unaudited condensed interim consolidated financial statements of the Company for the three and nine months ended April 30, 2017 were reviewed, approved and authorized for issue by the Board of Directors on June 21, The Company previously sold all of its property interests and is evaluating suitable assets or businesses to acquire or merge with, with a view to maximizing value for shareholders. As a result of the disposition of the Company s property interests, it does not currently have any active exploration, development or production projects. The ability of the Company to continue as a going concern in the future is dependant upon the identification of a new business opportunity to generate positive cash flows from operations and the Company depends on the ability to obtain additional financing. There is no assurance that the Company will be successful in achieving these objectives. These consolidated financial statements do not include the adjustments that would be necessary should the Company be unable to continue as a going concern. The adjustments could be material. 2. Basis of preparation The unaudited condensed interim consolidated financial statements of the Company have been prepared in accordance with the International Financial Reporting Standard ( IFRS ) issued by the International Accounting Standard Board ( IASB ) in accordance with International Accounting Standards ( IAS ) 34, Interim Financial Reporting. These unaudited condensed interim consolidated financial statements have been prepared on a historical basis, except for those financial instruments carried at fair value. In addition, these unaudited condensed interim consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The unaudited condensed interim consolidated financial statements do not contain all of the required annual disclosures and should be read in conjunction with the Company s annual financial statements for the year ended July 31, 2016 and 2015 prepared in accordance with International Financial Reporting Standards ( IFRS ). The same accounting policies, presentation and methods of computation have been followed in these unaudited condensed interim consolidated financial statements as were applied in the Company s consolidated financial statements for the years ended July 31, 2016 and 2015, except as noted below. New accounting policies IFRS 11, "Joint Arrangements": In May 2014, the IASB issued amendments to IFRS 11 to address the accounting for acquisitions of interests in joint operations. The amendments address how a joint operator should account for the acquisition of an interest in a joint operation in which the activity of the joint operation constitutes a business. IFRS 11, as amended, now requires that such transactions be accounted for using the principles related to business combinations accounting as outlined in IFRS 3, "Business Combinations". On August 1, 2016, the Company adopted these amendments and there was no material impact on the Company s unaudited condensed interim consolidated

7 3. Cash and cash equivalents As at As at April 30, July 31, Cash at bank and on hand $ 4,016 $ 34,571 Short-term bank deposits 1,512,831 1,775, Property and equipment $ 1,516,847 $ 1,810,247 During the nine months ended April 30, 2016, the Company disposed of net assets of $5,558,041, comprised of inventory, exploration and evaluation property, property and equipment and decommissioning liabilities, for proceeds of $1,265,010 resulting in a loss on disposal of asset of $4,293, Accounts payable and accrued liabilities As at As at April 30, July 31, Accounts payable $ 6,209 $ 230,839 Accruals and others 475, ,745 Total accounts payable and other liabilities $ 481,401 $ 466,584 During the nine months ended April 30, 2016, the Company settled certain accounts payables with creditors resulting in gain on settlement of accounts payable and other liabilities of $628, Share capital a) Authorized share capital - the authorized share capital consists of an unlimited number of common shares. b) Common shares issued: as at April 30, 2017, the issued share capital amounted to $20,802,372. Changes in issued share capital are as follows: Number of common shares Amount Balance, July 31, ,116,681 $ 20,568,245 Shares issued for service (i) 1,099, ,127 Balance, April 30, ,216,186 $ 20,802,372 Balance, July 31, 2016 and April 30, ,216,186 $ 20,802,372 (i) During the nine months ended April 30, 2017, an officer of the Company received nil shares valued at $nil, based on the quoted market price of the shares at the time of issue, (nine months ended April 30, ,099,505 shares valued at $234,127) relating to a portion of his accrued salary for the year ended July 31, 2016 (July 31, 2015). The officer's consulting contract, effective December 1, 2014, requires the Company to pay the officer a monthly salary of $29,167. The salary is payable in cash or shares and valued on the last trading day for each month

8 7. Stock options On February 3, 2017, the shareholders of the Company approved a stock option plan, pursuant to which, the Company may issue up to a number of options that is 10% of the outstanding common shares of the Company to employees, directors and officers. The following table reflects the continuity of stock options for the periods presented: Number of Weighted average stock options exercise price ($) Balance, July 31, 2015 and April 30, ,361, Balance, July 31, ,036, Expired/Forfeited (50,000) 0.34 Balance, April 30, ,986, The following table reflects the actual stock options issued and outstanding as of April 30, 2017: Weighted average Number of remaining Number of options Exercise contractual options vested Expiry date price (Cdn$) life (years) outstanding (exercisable) March 1, ,000,000 1,000,000 August 1, ,436,568 2,436,568 November 21, , , ,986,568 3,869, Warrants The following table reflects the continuity of warrants for the periods presented: Number of Weighted average warrants exercise price (Cdn$) Balance, July 31, 2015 and April 30, ,353, Balance, July 31, 2016 and April 30, ,353, The following table reflects the actual warrants issued and outstanding as of April 30, 2017: Number of warrants outstanding Exercise price (Cdn$) Expiry date 14,353, December 16,

9 9. Net loss per common share The calculation of basic and diluted loss per share for the three and nine months ended April 30, 2017, was based on the loss attributable to common shareholders of $142,178 and $314,309, respectively (three and nine months ended April 30, $4,330,250 and $4,953,680, respectively) and the weighted average number of common shares outstanding of 75,216,186 and 75,216,186, respectively for the three and nine months ended April 30, 2017 (three and nine months ended April 30, ,216,186 and 75,019,559, respectively). Diluted loss per share did not include the effect of 3,986,568 (April 30, ,361,568) stock options and 14,353,455 (April 30, ,353,455) warrants as they are anti-dilutive. 10. General and administrative Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended April 30, April 30, April 30, April 30, Salary and salary related $ 102,510 $ 266,743 $ 321,486 $ 613,875 Legal and professional 4, ,892 45, ,120 Audit and accounting 12,388 5,787 46,000 80,312 Stock-based compensation 3,078 76,141 14, ,423 General office and other 19,239 85,391 55, , Gain on dissolution of subsidiary $ 142,178 $ 681,954 $ 483,732 $ 1,604,515 During the nine months ended April 30, 2017, the Company dissolved its wholly owned subsidiary, RHC Energy (USA) LLC. As a result, a gain on dissolution of subsidiary of $169,423 was recorded due to accounts payable and accrued liabilities dissolved. 12. Commitments The Company is party to a management contract with the Executive Chairman. This contract contains clauses requiring that additional payments of $1,050,000 be made upon the occurrence of certain events such as a change of control. As a triggering event has not taken place, the contingent payments have not been reflected in these consolidated financial statements. In addition, the contract provides that any unvested options will become fully vested and that the Executive Chairman will have 24 months to exercise any options held, in the event of a change of control. 13. Related party transactions The Company shares office space and services in Vaughan, Ontario with Capital Z Corporation, an entity wholly owned by the Executive Chairman of RHC, at no charge. The Company utilized CFO services provided by Michael Graham, a director of the Company and an employee of the Company as of November The following table summarizes transactions with related parties: Nine Months Ended April 30, Consulting services from Michael Graham $ 14,181 $ 3,765 Key management compensation 311, ,273 $ 325,355 $ 614,

10 13. Related party transactions (continued) Three Months Ended April 30, Consulting services from Michael Graham $ - $ 3,765 Key management compensation $ 101,843 $ 325,652 $ 101,843 $ 329,417 Compensation of key management personnel of the Company The remuneration of directors and other members of key management personnel during the periods presented were as follows: Nine Months Ended April 30, Short-term benefits $ 325,355 $ 395,519 Share-based payments - 218,519 $ 325,355 $ 614,038 Three months ended April 30, Short-term benefits $ 101,843 $ 263,180 Share-based payments - 66,237 $ 101,843 $ 329,417 The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of individuals and market trends. In accordance with IAS 24, key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company. Per the Chairman's employment contract effective December 1, 2014 and onwards, the Chairman has the option to receive his monthly compensation of $29,167 in cash or as shares every 3, 6, or 12 months. See also discussion of commitments pursuant to this agreement, included in Note 12. Included in accounts payable and accrued liabilities at April 30, 2017 is $462,299 (July 31, $216,597) owing to the Chairman. This amount is unsecured, non-interest bearing and due on demand. 14. Subsequent event Subsequent to April 30, 2017, the Company announced it entered into an amalgamation agreement dated June 16, 2017 with Vela Resources Corp. ("Vela"), a Saskatchewan based private company focused on the exploration for and development of helium resources in Southern Saskatchewan. The amalgamation will proceed as an amalgamation of Vela with a wholly-owned subsidiary of RHC ("Subco") incorporated specifically for the transaction (the "Amalgamation"). Vela and Subco will amalgamate as one corporation, being Amalco, under the name "Vela Resources Corp." and, among other things: (a) each issued and outstanding common share of Vela ("Vela Share(s)") (other than any Vela dissenting shareholders) will be exchanged for approximately common shares of RHC ("RHC Shares"), following which all such Vela Shares shall be cancelled; - 9 -

11 14. Subsequent event (continued) (b) each issued and outstanding Vela Share held by a Vela dissenting shareholder will be cancelled and the Vela dissenting shareholder will be entitled to be paid the fair value of such Vela Shares by Amalco in accordance with The Business Corporations Act (Saskatchewan); (c) each issued and outstanding Subco common share will be exchanged for one Amalco common share following which all such Subco common shares shall be cancelled; (d) it is anticipated that each outstanding Vela stock option will be exercised at its face value immediately prior to the Amalgamation, and any Vela stock option not exercised prior to the Amalgamation shall be cancelled; and (e) Amalco will issue to RHC one fully paid and non-assessable Amalco common share for each RHC Share issued. There are currently 19,775,100 Vela Shares, 1,550,000 Vela stock options and 1,140,000 Vela warrants outstanding. RHC will issue 75,216,186 RHC Shares in exchange for all of the issued and outstanding Vela Shares at the time of Amalgamation, representing approximately 50% of the issued and outstanding RHC Shares calculated on an undiluted basis. The 1,140,000 Vela warrants currently outstanding may be converted to RHC broker warrants at the same conversion ratio as Vela Shares at an exercise price of not less than $0.05 per RHC Share, unless such warrants are exercised prior to the completion of the transaction, in which case the share conversion ratio will be adjusted slightly to reflect the total number of Vela Shares being converted for the 75,216,186 RHC Shares being issued. Completion of the Amalgamation is subject to the final approval of the TSX-V, which is currently reviewing the transaction as a reactivation of RHC for listing as a Tier 2 oil and gas issuer. Trading in the shares of RHC will remain halted. They have agreed that, in conjunction with the completion of the Amalgamation, two of the current four directors of RHC will resign in favour of two appointees of Vela. It is expected that new board of the resulting issuer will be comprised of four directors, two nominees from Vela and two nominees from RHC. The new board formed on closing of the Amalgamation shall appoint Scott Newman (a director of Vela) as Chief Executive Officer of the resulting issuer and Andrew Davidson (President and a director of Vela) as Chief Financial Officer of the resulting issuer. Commencing operations in 2016, Vela has focused its efforts on the strategic acquisition of significant acreage of helium exploration and permits and helium leases over land that hosts some of the highest concentrations of helium known in Saskatchewan. At present, Vela holds 99,047 acres under helium leases and 132,826 acres under 21-year helium permits, with an additional 69,120 of permit applications under review with the Saskatchewan Ministry of the Economy